admin Flashcards
(15 cards)
powers of trustee
1) look to trust documents first
2) if silent, go to statute and common law
3) if trust is silent, grant trustee all those powers necessary to act as a reasonably prudent person in managing the trust (power to sell/transfer trust prop; enter into a lease or a K; pay taxes and reasonable expenses; sever or consolidate trust prop)
T’s duties
- loyalty
- care
- act in the best interest of the B when investing and managing trust
- any B has standing against the T to enforce the fiduciary duty
- such standing grows out B’s equitable interest
good faith standard
loyalty= objective (was T reasonable)
good faith= subjective (did T act in GF)
no self-dealing
- T cannot profit from self-dealing
- cannot do business with trust
- breach per se of duty of loyalty
No further inquiry
- once self-dealing is established, court will not inquire into the T’s reasonableness or good faith
- even if trust documents authorize self-dealing transaction must still be reasonable and fair for the trustee to avoid liability
Duty of care/prudence
- in a trust setting, standard care is that which a person of ordinary prudence would practice with his own estate
- should treat as if it’s his own prop
- at common law, could not delegate this to a 3P
- modern law permits deleations if it would be unreasonable for settlor to expect T to undertake such functions (T must still oversee process)
conflict of interest
-if T enters into a non-self dealing conflict of interest, the conflict is assessed under the reasonable and good faith test
Investments
- at CL trustees were limited to specific list of acceptable investments. T breached if she departed from the list of acceptable investments
- Modern rule (TX)- prudent investor rule- T ha the discretion to invest and manage the trust prop as would a prudent investor
Prudent Investor rule applied
- T is expected to diversify assets as to spread the risk of loss
- make trust prop as productive as possible
- measure investments by looking at portfolio as a whole not by looking at individual investments (portfolio approach)
duty if impartiality
- in a trust with successive interests, (present and future) T has a duty to balance competing interests of the different classes of B
- demands allocation be balanced to treat life tenant and remaindermen the same
life tenatn
-normally entitled to trust income
remainderman
-normally entitled to trust principal
traditional approach to allocations
- $ generated by trust prop= income
- $ generated in connection with conveyance of trust prop was prinicpal
modern approach to allocations
- UNniform principal and income act
- sets a standard of looking at the total return on the portfolio, regardless of classifications of income or principal
- T recharazterizes items and reallocates investments as necessary to fulfill trust purposes as long as its reasonable
admin duties
- T has a duty to inform B about he nature of the trust prop
- t muts give B sufficient information so they can enforce their rights
- T has a duty to account for actions taken on behalf of the trust (T’s duty to report on the health of the trust’s portfolio; usually once a year)
